The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.
Ohio lawmakers have been busy this month working on property tax reforms. It’s notable for an issue both complicated theoretically and challenging politically. The recent flurry of activity comes thanks, in part, to a campaign to abolish property taxes outright at the ballot.
First, lawmakers overrode Gov. Mike DeWine’s veto of a budget provision eliminating emergency, substitute and replacement levies. Republican lawmakers argued the names are confusing and muddy the water for voters. After this November’s election, all those options will be off the table.
In the last few weeks, the Ohio House approved four bills meant to rein in property taxes in going forward.
Ohio House Bill 129 changes a longstanding tax reduction formula, creating new slack for additional cuts.
Ohio House Bill 309 empowers to local commissions to trim levies after the fact if they determine they’re raising too much revenue.
Ohio House Bills 186 and 335 limit the increase in property taxes to the rate of inflation in the economy.
It’s a lot of moving parts. Many Democrats contend they still haven’t done enough, and state senators still have to weigh in.
But the legislation offers a rough sketch or an opening bid detailing what lawmakers are willing to do to address growing concerns about property taxes.
The questions now are what do property taxes look like if those bills take effect? And will it make a difference if voters are asked to decide whether to abolish property taxes?
How it all fits together
Ohio House Speaker Matt Huffman thinks lawmakers have made a strong case to Ohio voters.
“This is a big deal,” he said Wednesday after lawmakers approved the last parts of the property tax package. “As a result of these things, over the next three years, there’s going to be $2.4 billion less paid, which is about a 10% cut — that’s significant.”
Those savings come from the two bills limiting tax increases to the rate of inflation. Recent spikes in property values have been particularly hard in rural areas where many schools levy the state minimum (20 mills or 2%).
A 1970s-era Ohio law reduces tax rates as property values rise, but when a district hits that 20-mill floor, there’s nothing left to cut. After that, taxes rise with property values.
Huffman noted the legislation targeting those districts works as a credit, so homeowners will actually see the amount they saved itemized on their bill.
He thinks that could make a difference for skeptical property owners.
“I think this should convince a reasonable voter, a reasonable citizen in Ohio, that something significant has been done,” he said.
Earlier this year, Ohio realtors, auditors and the state chamber of commerce rolled out a property tax advocacy group called The Ohio Taxpayer Protection Coalition.
Their biggest ask was for lawmakers to fix that decades-old tax reduction formula.
The system was meant to ensure taxes don’t increase without voters first approving them, but in districts at the 20-mill floors, that’s no longer happening.
Coalition chair, and former state tax commissioner, Tom Zaino is pretty thrilled with lawmakers’ work.
He praised them for taking steps to “tamp down that future growth to the rate of inflation.”
He sees the package as a compromise between making tax bills more manageable for homeowners while giving school districts some benefit from rising property values.
“I think it’s a real win-win,” he said, adding “voters can always add more revenue in the future. They can vote more taxes on themselves.”
Zaino said eliminating property taxes would “ruin” Ohio, and that homeowners should view the latest action as significant reform.
Ohio’s tax reduction formula is almost 50 years old, and he predicted 50 years from now, people will be talking about how the latest reform package.
Economist Howard Fleeter agrees that the House’s work is significant, but he worries lawmakers haven’t done quite enough.
He explained Ohio’s tax system is quirky.
We deliver a lot of services at the local level, so local taxes are relatively high. But our state taxes are relatively low, because we don’t handle those services at the state level, like many others do.
For a long time, the two balanced out, and Ohio’s overall tax burden landed near the middle.
But in recent years, Fleeter said, that imbalance has grown, and the tax burden has shifted further toward local governments.
When you mix greater reliance on local taxes and a sharp increase in property values, that’s “really the straw that broke the camel’s back,” he said.
To Fleeter, some kind of cap on property taxes going forward was probably “a necessary step.”
But rather than just limiting taxes going forward, lawmakers decided to go back to counties’ most recent valuations — starting the clock as far back as 2023.
That means homeowners in districts at the 20-mill floor (about 2/3 of districts in the state) will see their taxes go down.
But homeowners in more urban districts won’t see the same benefit.
With homeowners paying less, lawmakers also had to figure out what to do about the shortfall.
Do schools just get by with less or does the state step in to make up the difference?
The House decided to spend more than $300 million to hold schools harmless until their next revaluation.
Fleeter said it’s a good idea for the state to pitch in, but he thinks it would’ve been better to scrap the retroactive start date and use the money to provide targeted relief — like increasing the homestead exemption or an income-based credit.
And he warned there could be challenges down the road.
If property values continue to outpace inflation, for instance, the gap between what schools could’ve collected and what they actually receive will widen.
“The next increase that school districts get will not only be limited,” he said, “but it will also start from a lower starting point.”
Despite the state’s one-time cash infusion, some districts could wind up with less money in a year or two than they have right now.
And perhaps more consequential, Ohio’s school funding formula weighs a district’s ability to pay — known as capacity — when determining how much the state ponies up.
But right now, capacity is based on property values — not taxes. With a new cap in place, a district’s capacity could look much greater than its actual revenue.
Local views
Athens County Auditor Jill Davidson has been serving in that post for more than two decades, and she said Ohio’s property tax challenges have been developing for a very long time.
“I don’t believe that this is a COVID property housing boom issue,” she insisted.
Davidson points to 2005 when the state transitioned its business taxes from tangible personal property to commercial activity.
That change shut off a stream local business tax revenue and shifted it to the state. In the most recent fiscal year, it generated $2.3 billion.
“I’m not saying (tangible) personal property tax was the best way to do that,” Davidson said. “What I am saying is that was over $3 million in Athens County that was coming back to our community to help those businesses be successful that we don’t have anymore.”
Next she points to 2011, when Gov. John Kasich cut the Local Government Fund in half.
Athens County still isn’t receiving as much as it did before that cut.
Then in 2013, lawmakers nixed a credit on certain levies, effectively shifting a 12.5% share onto homeowners.
Davidson is ready to hold up her end of the bargain. She’s all for government efficiency and accountability but explains Southeast Ohio “does not have the capability to overcome those cuts and be able to absorb those losses.”
Davidson praised lawmakers for empowering local budget commissions to roll back excessive levies but found their other property tax bills wanting.
She sees the moves as ‘reform’ rather than ‘relief,’ with state lawmakers again asking local governments to pick up the tab.
The bill putting inflationary caps on inside millage (the 10 mills or 1% local governments are constitutionally allowed to levy) almost guarantees a reduction in services.
At some point, she said, something’s got to give.
“You can’t cap growth and expect the same level of service, right?” she said.
And Davidson sees momentum growing behind the campaign to abolish property taxes, adding it’s a lot harder to make the case for keeping them than it is for getting rid of them.
Still, Davidson thinks lawmakers’ efforts so far haven’t offered a strong enough response.
“The voter wants to hear that you’re going to fix it,” she said. “I don’t think any of these bills fix it.”
Like Fleeter she contends the state should be making targeted investments like bolstering the homestead exemption.
Current benchmarks for the program amount to “comic relief,” she said.
The people receiving the exemption are barely making ends meet she said “and we’re giving them a few hundred dollars here or there to help with their property tax burden — that’s not even meaningful.”
In the end, Davidson worries, taxpayers are likely to see more levies on the ballot as local service providers feel the pinch.
“And how do you think that is going to be interpreted to the voter?” she asked.
In Northeast Ohio’s Lake County, Commissioner John Plecnik has similar frustrations but a very different response.
Like Fleeter and Davidson, he points to the yearslong shift of Ohio’s tax burden onto local taxpayers.
He contends state lawmakers are only “nibbling on things” instead of making substantive changes.
“They promise small reductions in future increases. They promise more procedural fairness and transparency — all good things, by the way — but not enough,” he said.
“And none of which actually cut people’s taxes so that they’re lower tomorrow than they were today.”
Plecnik contends Ohio can eliminate property taxes without completely eviscerating local services — lawmakers would just have to start cutting into the state budget.
“You know, we’d have to cut a lot,” he said, “I’m not saying this would be easy, but it’s certainly doable.”
The changes he’s contemplating would be a dramatic restructuring of state government, like stripping a home to the studs and starting over.
He doesn’t have an exact blueprint, but suggests several state departments would disappear, adding as an afterthought, “lieutenant governor could be a non-paid position.”
But most other observers, including Zaino, Fleeter, Davidson and lawmakers on both sides of the aisle, think abolishing property taxes would be an unmitigated disaster.
If property taxes disappeared, governments would have to make deep cuts to services or dramatic tax increases elsewhere.
In 2024, property taxes generated about $20 billion.
In the most recent fiscal year, sales and income tax combined amounted to a little more than $21 billion.
Plecnik thinks it’s still possible for lawmakers to make a good enough case that Ohioans reconsider supporting the constitutional amendment.
First, he says lawmakers should expand the homestead exemption to 100% for seniors and disabled veterans.
And second, Ohio should follow California’s lead and tie property taxes to a home’s sales price — effectively locking in a homeowner’s property taxes regardless of changes in the home’s value.
Ohio is moving to a flat 2.75% income tax rate next year; California’s income tax rates run as high as 13.3%.
Regardless, Plecnick argues it’s up to state lawmakers to convince skeptical constituents, and he warns “half measures only makes them madder.”
“Either you take the cut,” he said of state officials, “and give real property tax cuts through it, or the people are going to take all the money back come November 2026 when this goes on the ballot.”
